Risk-based Capital Requirements comprise the sum of a firm's Expenditure Requirement, Position Risk Requirement, Counterparty Risk Requirement and Foreign Exchange Risk Requirement. The actual amount of capital that is required to be held varies depending on the size of an institution's cost base and its various exposures. In practice, the Risk Based Capital Requirement of Category 2 investment firms, because they are not allowed to deal in financial instruments as principal (and thus incur position risk), would largely be determined by its Expenditure Requirement (and any currency mismatches between its assets and liabilities).